Lobbying: An Austrian Solution

A new law seeks to curb political corruption, but critics view it as another half-hearted attempt

"Of course I'm a lobbyist, yes, and I'm open for that." The man in the blurry video is Ernst Strasser, then head of the Austrian People’s Party (ÖVP) delegation in the European Parliament and a former interior minister.

He is sitting at a table in a busy restaurant in Brussels and talking about filing amendments to EU banking laws on behalf of investment firms. What he doesn't know is that the business people offering him a chair on the advisory board of a fake lobbying company are reporters of London’s Sunday Times secretly filming the meeting. Weeks later, Strasser is forced to resign and Austria has its next lobbying scandal. (See "Something Rotten in the State of Austria" in Oct. 2011 TVR.)

Coming to terms with Austria’s less than glorious lobbying past has resulted in a central belief among legislators: that lobbying is not bad in itself but that it needs to be regulated.

To date, there are no rules to curtail improper lobbying. But cases like Strasser’s, and on-going investigations into alleged graft by Telekom Austria, have accelerated efforts to address the imbalance.

After presenting draft legislation in November, the Austrian Parliament’s Judiciary Committee is expected to pass the "Lobbying and Special Interest Group Transparency Law" on 13 Mar., to come into force in January 2013.

"If the bill passes, it would be the strictest regulation of the lobbying industry anywhere in the world, apart from the United States," commented Feri Thierry, the chairman of the Austrian Public Affairs Association (ÖPAV), a group of lobbying organisations, on the website www.prconversations.com.

The law would oblige lobbying agencies and advocacy groups to officially register their activities and follow a code of conduct. It would also outlaw fake invoices designed to obscure bribes.

"In a best-case scenario, the new lobbying law would function as a map that discloses who is active in the lobbying scene," says Dieter Heine of the law firm PHH Prochaska Heine Havranek.

Blowing one’s own trumpet

While politicians are busy applauding themselves for the legislation, many experts criticise the solution as half-hearted. While it sets minimum standards, more needs to be done, they say.

Justice Minister Beatrix Karl (ÖVP) has called the new law a "milestone." In a press release, she asserted that "in this area, Austria can take on an internationally pioneering role."

For Heine, this sounds laughable. "A pioneering role? Not at all," he chuckles. Austria is far behind nations like the U.S. or Canada where registered lobbying is more common than in Europe. Even for EU institutions, there has been a lobbying register for quite some time, he says. "Austria is behind the curve in that respect."

In Germany, the Bundestag keeps a lobbying register, with the aim of bringing together MPs and interest groups, whereas in Austria the Ministry of Justice will be entrusted with this task.

"Our big neighbour’s register has a different rationale than the Austrian proposal’s emphasis on transparency," says Hubert Sickinger, vice president of the Austrian Chapter of Transparency International, a corruption watchdog.

Another difference: The German register includes the Church and the trade unions. In Austria, the lobbying activities of the "social partners" such as the Austrian Trade Union Federation (ÖGB) and the Federation of Austrian Industries (IV) – will continue to go unrecorded. The same goes for state-owned enterprises such as the Austrian National Railway (ÖBB).

Thierry views the exemptions as unjustified. "They all seek to exert influence on politics – and should therefore be subjected to the same rules."

In some ways, however, the Austrian law will actually go beyond EU and even international standards. Conflict of interest rules for public officials will be tightened. Failure to register will be sanctioned, and bonuses and contingency fees will be outlawed. This means that lobbying firms can no longer take a cut of successful deals, but instead must be paid a fee for services regardless of results.

"This would be the law’s true sharp edge," says Sickinger. "But it does not go far enough." For example, only full-time lobbyists will face legal consequences for failing to join the register, thus exempting ordinary corporate representatives.

A simple business directory

Another weakness is the register’s failure to disclose lobbyists’ employers and agendas: whom they are working for and to what end. While the list of registered companies will be public, the content of their lobbying contracts will not. In its present form, therefore, Sickinger views the register as little more than a "simple business directory".

Most importantly, critics point out that the law will do nothing to stop political corruption until party financing, another effective way of buying influence, is addressed. In a report published in January, the Group of States Against Corruption in the Council of Europe, an international organisation, criticised Austria’s lax rules for party donations. Existing law only requires parties to report donations over €7,260 to the Court of Audit (Rechnungshof) which in turn is obliged to keep the donor’s identity secret.

"On its own, the [lobbying] law is only one piece in the puzzle," Heine says. Yet the stakes in solving this political puzzle are high.

At home, Austrians’ trust in their politicians is at a record low. Only 5 per cent of respondents viewed the coalition parties as "largely uncorrupt" in a survey conducted by the polling institute Karmasin last October.

Internationally, Austria’s standing as a business location is on the line, Heine points out. Transparent and orderly lobbying procedures are likely to strengthen foreign investors’ confidence in the rule of law in Austria.

In the end, however, it appears that politicians have opted for just another "Austrian solution", a political deal that looks good on paper, but is taken with a wink.